Part of cannabis and investing
Jimmy's Cannabis store in Martensville, Sask. on Oct. 31, 2018.David Stobbe/The Globe and Mail
On the Alberta Cannabis website, the most common phrase is “out of stock” – stamped on more than four out of five products listed. For CannabisNL, it’s worse, with about six out of seven items on display listed as “coming soon.”
In Saskatchewan, the supply crunch has squeezed Jimmy’s Cannabis, a private retailer that buys directly from licensed cannabis producers. The Jimmy’s in Martensville opened on Oct. 17 and ran out of cannabis the next day. The company’s Battleford location has managed to stay open.
“We’ve had multiple orders that haven’t come through,” said David Thomas, co-owner of Jimmy’s. “I don’t see a quick fix.”
Welcome to the early days of legal cannabis in Canada, where, two weeks into the new market, the widespread predictions of supply challenges have come to fruition. Governments have been surprised by the demand. The online Ontario Cannabis Store has called it “unbelievably high" and now has roughly a third of what it was selling on the first day of legalization. Producers that have never grown cannabis at this scale cannot deliver what they promised. Ottawa’s approval process has also been slow. Meanwhile, investors have grown skeptical, and share prices of cannabis growers have plummeted.
But cannabis companies insist they will make good on their commitments as legalization unfolds. Canopy Growth Corp., the leading grower, said its licensed capacity to grow and sell cannabis at the end of the year will be double that of the end of summer. Canopy said it will meet all of its orders over the course of the first year of legal cannabis.
“We’re shipping things on a near-daily basis to provinces to keep products on the shelf,” Canopy spokesman Jordan Sinclair. “I understand there’s frustration. But we’re hopeful customers will continue coming back.” He added: “It’s not a binary issue, where shortages equal failure.”
Mr. Thomas at Jimmy’s Cannabis is confident. He believes lack of early supply indicates Canadians have embraced the legal market. “The demand is just unsustainable for the current supply chain.” He said there are a number of producers who are “almost ready” to provide new supply.
Legalization in Canada so far has unfolded the way it did in places such as Colorado and Washington State, where legal cannabis got off to a slow start. In Colorado, which was the first U.S. state to open a legal recreational-cannabis market in January, 2014, it took 11 months before the size of the recreational market exceeded the long-standing medicinal market.
Some investors have backed away. The Horizons Marijuana Life Sciences ETF, which tracks the sector, has lost almost a third of its value since a record high the day before legalization. Analyst Martin Landry of GMP Securities LP said in a report on Monday that cannabis sales in Canada will be lower this year than expected.
In Alberta, Chara Goodings, a Gaming, Liquor and Cannabis spokeswoman, said: "We just aren’t getting the amount that we need. I don’t think we’ll run out of stock. I just think there will be much less than retailers or the public want.”
Four20 Premium Market, a private retail store in Calgary, has been able to navigate the situation.
“We’ve never been out of cannabis,” said Ryan Kaye, vice-president of operations for the company. Four20 will open a second store by mid-November and is confident supply won’t be a problem. “We’ve been prepared for this,” he said.
Alcanna Inc. has five NOVA cannabis stores in Alberta and closed one on Monday because of low supplies but reopened on Tuesday. Shortages could stretch to spring and maybe as long as next summer, said James Burns, CEO of Alcanna. But business has been good.
“We had an incredible weekend,” Mr. Burns said.
The Ontario Cannabis Store is facing a barrage of customer complaints. Spokesman Daffyd Roderick said the OCS has decided not to do interviews for the time being. The OCS has said that its supply is adequate and has also blamed the rotating strikes at Canada Post for delivery issues. Orders made on Oct. 17 took more than a week to arrive in customers’ hands.
Quebec has decided to limit operations of its 12 cannabis stores to four days a week, Thursday through Sunday, a triage move that started this week.
In B.C., where the province’s five largest suppliers all fell short, there is still plenty of pot, with more than 100 products available. This bounty is due to what the government calls “a unique challenge.” The government has opened just one store, in the small city of Kamloops, in addition to its website. But some existing illicit-market stores have continued to operate in cities such as Vancouver, as well as in Kamloops. The B.C. government reported about 22,000 purchases on its website and at its store in the first week, a fraction of the 150,000-plus orders in Ontario and 138,000 or so in Quebec.
The B.C. government is “competing with a highly developed and discerning illicit market,” said Kate Bilney, a spokeswoman for the province’s Liquor Distribution Branch. “Consumers can readily access product.”
There are 132 licensed producers of cannabis in Canada, up from 120 several weeks ago. Companies such as Canopy hold more than one licence. For an experienced grower, it takes about half a year from receiving a sales licence to get product on a retail shelf.
Of the licensed producers, 58 have cultivation licences but not a sales licence. The process to get fully licensed by Ottawa is lengthy, stretching out over multiple years. A number of facilities, such as Aurora Cannabis Inc.’s operation near Edmonton, are partially licensed. It will still be a month before Aurora has plants in all its growing rooms there.
With a report from Mark Rendell
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